Before you read about how to put the five “magic paths” to work,
take a moment to look at these frequently asked questions.
Is this book designed for the experienced real estate investor?
Absolutely not. Although anyone with real estate experience could
benefit by reviewing the material here, what is presented is primarily
for the beginning investor.
Will these strategies work in my area?
Certainly. Although markets vary, opportunities abound in each area.
The book contains a discussion on how to evaluate your local market
for using the best strategy.
Do I create a lot of debt in real estate investing?
Not necessarily. Creating debt is not your goal. Just remember what
debt you do take on is backed up by a tangible property that is worth
more. And when these debts are paid off their value will have gone
into your pocket.
Will all the techniques discussed in the book work?
Yes, they comprise the major techniques used to practice investing in
real estate in the United States today. Although some have more
popularity than others, none are minor or insignificant.
Do they involve “no-money-down” schemes?
Not at all. Some require more money than others. But often several
techniques are used to build up cash reserves for their use elsewhere.
What is this so-called creative financing all about?
Creative financing is a catchall term that usually involves financing
other than or beyond a traditional mortgage loan. When used in this
book it refers to the seller’s participation in secondary financing and
the conservative use of a home equity loan.
Will using the techniques described here take much time?
Some take longer than others. You certainly don’t need to give up
your present work to get started with using several of the techniques.
Securing and arranging the work on a fixer-upper can often be done
easily on a part-time basis. Correspondingly, however, something like
Magic Paths FAQs 9
the operation of several apartment buildings may take a larger commitment
in time, unless professional management is used.
If I’m buying a single-family house or small apartment building do I have to
swindle the seller?
Of course not. Great profits come from dealing fairly in the marketplace.
Note that all prices come from comparable sales in the marketplace;
even a damaged fixer-upper has a reason for its low price.
Is this book comprehensive and all I need to know?
No, your study of real estate should be lifelong. Although the techniques
presented here are thorough and intended to get you started,
each is its own field with a distinct fraternity of followers, books,
courses, and gurus.
Are negotiations with sellers difficult?
Not at all. Even when you need to offer a seller less than what he or she
is asking, a seller is generally persuaded by the factual material and
comparable selling prices that you will gather regarding a property’s
value. You can make negotiating pleasant if the seller knows that you
want to take some of the responsibility of the real estate problem off his
or her shoulders. Note that you can often come near the seller’s asking
price if you name the terms; that makes it win–win for you both.
I’m not sure about my credit. How do I go about qualifying for a mortgage?
Two observations: First, consider that many investment properties,
both single- and multifamily, are financed in whole or in part by the
seller; second, many lenders base their mortgage decisions more on
the value of the property and less on the borrower. Once you have
real estate, regardless of how it’s financed, you will have gone a long
way to repairing any credit problem.
Do I need a real estate license?
Not to practice as an investor, you don’t. In fact, having a license may
compromise your investor status with the Internal Revenue Service
(IRS), as well as be a hindrance in working with sales agents. Further,
many sellers simply don’t want to talk to brokers, so don’t license
yourself to become one. Note that wholesaling a property may
feel like it requires a license, but even here you’re selling a contract
to buy a property over which you have a measure of control—and
not for a fee, but for a markup, or difference in price.
10 Five Magic Paths to Making a Fortune in Real Estate
Do I need to incorporate?
Generally, no. In fact, you will lose important tax advantages if you
do. Incorporating is supposed to limit liability, but if individuals
within a corporation act irresponsibly, the corporation will not shelter
their liability. As far as liability for someone having an accident on
your property goes, you should always cover yourself with the
proper insurance, and liability insurance is relatively inexpensive. As
for liability for the mortgage, even if you have a corporation you are
likely to be required to sign personally on the mortgage. (In this regard,
you should always make sure the mortgage is less than the
value of the property.)
What are the main ways in which I will spend my time?
Oh, yes, I didn’t tell you yet? It’s not so much about bricks and mortar
(although there may certainly be some of this). You will spend
most of your time contacting people, and the second biggest investment
of your time will go toward establishing value by investigating
comparable sales.
Will it take persistence?
Yes, definitely. It will also take indefatigability, stamina, determination,
purpose, grit, and, of course, pluck. Yes, lots of pluck.
In the next chapter, we’ll begin setting out the way you make money
with fixer-uppers.